Owen\'s Electronics has nine operating plants in seven southwestern states. Sale

Question

Owen's Electronics has nine operating plants in seven southwestern states. Sales for last year were $100 million, and the balance sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in the future). All assets (including fixed assets) and current liabilities will vary directly with sales. The firm is working at full capacity. Owen's has an aftertax profit margin of 7 percent and a dividend payout ratio of 25 percent If sales grow by 20 percent next year, determine how many dollars of new funds are needed to finance the growth (Do not round intermediate calculations. Enter your answer in dollars, not millions, (e.g.. $1,234,567).)

Explanation / Answer

Sales last year 100 Sales current year 120 Profit 8.4 Dividend paid 2.04 Transferred to retained earnings 6.36 Asset This year Next year Liabilities This year Next year cash 4 4.8 Accounts payable 17 20.4 accounts receivable 22 26.4 Accured wages 4 4.8 inventory 25 30 Accrued Taxes 10 12 current asset 51 61.2 Current liab 31 37.2 Fixed Asset 42 50.4 notes payable 12 14.4 Total Asset 93 111.36 common stock 17 20.4 retained earnings 33 39.36 New funds req 18.36 total liab and equity 93 111.36

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